Surprise! $8000 Homebuyer Tax Credit is Officially Extended and Expanded

first-time-home-buyer-tax-credit1I know, for the past 48 hours or so you’ve been seeing blogs all across the Interwebs shouting from the rooftops that the $8000 Homebuyer Tax Credit has been extended, expanded, retooled, rebuilt and pretty much made into the Six Million Dollar Man (actually, it’s closer to 10.8 Billion Dollars, man). But, as well-meaning as those eager beavers were…it just wasn’t so.

Yes, the Senate slammed it through in a 98-0 vote on Wednesday, but that didn’t make it a LAW; yes, the House breezed through a 403-12 vote to pass the bill yesterday, but that STILL didn’t make it a LAW. Well, today, after much hand-wringing and teeth-gnashing by Realtors, home buyers, and Republicans everywhere, the President finally signed the Worker, Homeownership, and Business Assistance Act of 2009 into law, and a collective sigh could be heard throughout the Land.

As you probably know, there are some changes to the tax credit that people should be aware of, so without further ado here is what the tax credit looks like in its current form:

  • The existing $8,000 tax credit for first time home buyers, which was set to expire on November 30th, is hereby extended to May 1, 2010. The credit is for 10 percent of the home’s purchase price or $8,000, whichever is less.
  • For current homeowners, the credit is 10 percent of the home’s purchase price or $6,500, whichever is less.
  • As a first-time home buyer, you have to either buy a home for the first time or you cannot have owned a primary home within the past three years. First time home buyers filing separate taxes are only eligible for a credit of $4000.
  • Current homeowners must have lived in their home for at least five consecutive years out of the past eight years in order to qualify for the $6,500 credit. Married homeowners filing taxes separately can only get a credit of $3250.
  • In order to claim the credit, a home buyer must be in a binding, written contract no later than April 30 1, 2010, and they must close on that contract no later than June 30, 2010. If you sign your contract on may 1st or later, you’re out of luck. Ditto if you close on July 1st or later.
  • The income limits for the old tax credit were $75,000 for singles and $150,000 for married couples filing jointly. Under the new credit, those limits have been increased to $125,000 for singles and $225,000 for married couples. If you earn more than those amounts, your potential credit will be reduced accordingly. Married couples who earn more than $245,000 are ineligible.
  • The maximum purchase price of a primary residence for the purposes of this credit is $800,000. If the home is $800,001, it doesn’t qualify.
  • Members of the Armed Forces deployed on duty outside the United States are also eligible for the tax credit; however, they must have been deployed outside the U.S. for at least 90 days between Dec 31, 2008 – May 1, 2010. They have until April 30, 2011 to sign their contract and June 30, 2011 to close the sale.
  • A Tax Fraud provision has been added to this bill to prevent unscrupulous people from abusing it. There have been many instances of tax fraud surrounding the old tax credit, so in order to claim the new credit you must submit documentation along with their tax return to prove the home was purchased. This would probably be a copy of the HUD-1 Settlement Statement, but you may want to check with your tax advisor to ensure you provide the right documents.
  • The credit is NOT retroactive on homes bought prior to the date of enactment of this legislation. There is no “grandfather” clause for the credit.
  • The credit may be applied to an RV, motor home, or houseboat as long as it it used as a primary residence.

So, I think that about covers everything about the new tax credit. Well, all the important stuff, that is. I could go on for days with the minutiae of the bill, but that would bore you to tears. If you have lots of time on your hands, or you just like subjecting yourself to torture, you can read the technical explanation of the bill here.

The information presented here was obtained from sources deemed to be reliable, including various government sources. However, if you happen to see something here that you feel is inaccurate or misleading, or if we’ve omitted something important, please bring it to our attention so we can research, verify and correct it.

This tax credit is the third in a series of credits designed to stimulate the housing market and, thereby, the economy. Some experts feel it will be the spark the economy needs to begin returning to prosperity again, while others are worried about the cost of the tax credit, not only right now, but also to future generations. In addition, they are not convinced that these tax credits have been instrumental in the rise in home sales over the past few months. The bottom line is this: Don’t let anyone tell you that you need to buy a house NOW because of this tax credit. Do your homework. Take all of your circumstances into account and make the best possible decision for you and your family that you can make before taking the plunge. If after all that, you’re sure it’s time for you to buy, give us a call…we’ll be here to guide you every step of the way!

(Update 11/9/09: These FAQ’s may be of use to you, check them out: Tax Credit FAQ)

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